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Guest opinion: Rule of law is violated in Dillard's case

By Charlie Danaher

Posted:
08/25/2013 01:00:00 AM MDT

Some laws undermine the rule of law. Take for instance the law that allows municipalities to condemn private property ostensibly for the purposes of curing "blight." The statutory definition of "blight" was invented to give municipalities the power to condemn property in order to transfer it to a new owner. And without fail it's always one that the municipality thinks will generate more tax revenue with it. And so it is with the Dillard's store in Longmont, which the city has declared blighted.

The federal Housing and Economic Recovery Act of 2008 defines blight: "A structure is blighted when it exhibits objectively determinable signs of deterioration sufficient to constitute a threat to human health, safety, and public welfare." Reading that definition, one might imagine an abandoned apartment complex with squatters occupying it, three-foot high grass, and busted windows.

The Dillard's case is so far from that situation that one has to wonder how the term "blight" could even apply. But politicians have cleverly stretched the term "public welfare" to mean "more tax revenue." One can get an indication of what a sham the blight designation is by reviewing the blight study -- formally called a Condition Survey -- completed by the city. A couple examples the study claims Dillard's property suffers from are: "Unusual Topography or Inadequate Public Improvements;" "Faulty Street Layout," which might result in a "Traffic Accident History." Maybe it's just me, but this sure seems to fall just a wee bit short of a "threat to human health or safety."

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To gain title to Dillard's property, the Longmont Urban Renewal Authority (LURA) joined forces with NewMark Merrill Mountain States (NMMS), the owner of Twin Peaks mall, and filed a petition to condemn the department store. The city stepped in because it was dissatisfied with the speed of negotiations between Dillard's and NMMS.

The city may think that it is simply trying to keep the mall development process moving forward, but it needs to consider the damage to economic freedom and property rights that occur when eminent domain is exercised.

Any fair minded person would see that Dillard's was only protecting its interest when it signed a contract that ensured it would have say over its destiny when it came to mall redevelopment. What it didn't count on -- and what no responsible business can -- was what might happen when a future developer ganged up with City of Longmont and exploit the much abused regulatory tool of eminent domain. Let's not forget that NMMS was fully aware of Dillard's agreement when they purchased Twin Peaks in early 2012.

In order to have the necessary confidence to invest millions of dollars and many years into establishing a department store, a business must count on the rule of law. This includes the assumption that the contracts protecting its property will be honored. This includes being able to count on the host city being a defender of the business's rights, and not as an adversary, as is the case now. If a developer can partner with a municipality to seize a business, this undermines all sense of predictability and security. If running a successful business turns into an exercise of who you know -- and who you cozy up to -- instead of how attractive a good or service you provide, corruption will be encouraged, and economic freedom will be harmed.

It should be noted that those who witness these types of injustices are paying close attention. And what they learn from this, and other such unjust situations, affects their future behavior. For instance, we shouldn't be surprised if a pursuing entity (in this case, the mall developer) makes insincere offers. If the developer knows that they can call on the city to take possession of the business, why would they bother making a generous offer? The City of Longmont should get out of the way of honest and fair negotiations, quit compromising ethical principles for the sake of more tax revenue, stop ganging up with the developer, and start supporting the rule of law. For if Dillard's is fair game, we all should worry.

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